China's factory recovery steps up as export, consumer demand grows

BEIJING (Reuters) -China’s factory output grew at the fastest pace in 20 months in November, as revived consumer spending and a gradual easing of COVID-19 restrictions in major trading partners lifted demand for the country’s manufactured goods.

FILE PHOTO: A worker wearing a face mask works on a production line manufacturing bicycle steel rim at a factory, as the country is hit by the novel coronavirus outbreak, in Hangzhou, Zhejiang province, China March 2, 2020. China Daily via REUTERS/File Photo

Industrial output growth quickened to 7.0% in November from a year earlier, data from the National Statistics Bureau (NBS) showed on Tuesday. That was in line with analyst expectations in a Reuters poll and faster than the 6.9% expansion in October.

China’s economy has staged an impressive recovery from its COVID-19 paralysis earlier this year, mainly driven by robust exports that have fired up the nation’s factories again.

An annual sales promotion extravaganza in November by China’s e-commerce giants has also open consumers’ wallets in a further boost to orders for small factories.

“China’s economy continued to accelerate across all fronts in November. We expect output to remain above-trend in the coming quarters, even as tailwinds from stimulus and exports start to ease,” said Julian Evans-Pritchard, of Capital Economics, in a note.

Retail sales rose 5% on-year, just missing analysts’ forecast for 5.2% growth but faster than the 4.3% increase in October.

Auto sales saw 11.8% growth and sales of household appliances grew 5.1% in November. Communications equipment sales jumped 43.6%.

Fixed-asset investment rose 2.6% in January-November from the same period last year, faster than a 1.8% increase in the first 10 months of 2020.

Private sector fixed-asset investment, which accounts for 60% of total investment, rose 0.2% in January-November, compared with a 0.7% decline in the first 10 months of the year.

China’s economic recovery looks to be accelerating in the fourth quarter, driven by stronger demand, credit growth and stimulus measures expected to provide a strong tailwind into 2021.

Industrial demand surged in November with non-ferrous output hitting a monthly record, as the country kept churning out metals used in manufacturing and construction.

NBS spokesman Fu Linghui said at a news conference in Beijing he expects growth in 2021 to be “relatively fast,” although that would be due to a low base this year, rather than any significant changes in the economy.

China could make some policy adjustments as the economy improves, he said.

“We expect 7% GDP growth in 2021 from 1.7% in 2020,” said Iris Pang, ING’s Chief Economist for Greater China, by email.

Factory activity growth hit a more than three-year high in November, an official survey showed earlier this month, as fewer COVID-19 infections boosted consumer confidence.

Exports also surged at their fastest pace in almost three years thanks to demand for personal protective equipment and electronics products for working from home.

More recently, however, tougher measures to contain the coronavirus imposed by the country’s trading partners have created shipping bottle necks, pushing up transportation costs and capping the speed of China’s recovery.

Reporting by Kevin Yao, Gabriel Crossley, and Colin Qian; Editing by Sam Holmes